Hi everybody. In this class, let's do some practice working with financial statements and figuring cash flow. Suppose the following information is available for Yonsei Corporation. Let's prepare an income statement for 2015 and balance sheet for 2014 and 2015. Next, let's calculate cash flow from assets, cash flow to creditors, and cash flow to stockholders for Yonsei corporation for 2015. Use 25% tax rate throughout. First, let's split out items in balance sheet from information given in the table. You can type in equal and select the cell that includes current assets of 2014. As you can find in the table, cell B7 includes current assets in 2014. Cell C7 includes current assets in 2015. Cell B8 includes net fixed assets in 2014. Cell C8 includes net fixed assets in 2015. Total assets are sum of current assets and net fixed assets. You can find total assets of 2015 in the same way. Now, we know total assets are $9,700 in 2014, and $10,100 in 2015. Next, let's move to liabilities. Cell B9 includes current liabilities of 2014. Cell C9 includes current liabilities of 2015. Cell B10 includes long-term debt of 2014. Cell C10 includes long-term debt of 2015. Equity is the difference between total assets and sum of current liabilities and long-term debt. Equity is $5,700 in 2014. You can find equity for 2015 in the same way. And it is $6,450. Total liabilities and shareholder's equity are sum of current assets net fixed assets and equity. You can find total liabilities and shareholders equity of 2015 in the same way. The sum of current liabilities, long term debt, and equity is called total liabilities and shareholders equity and it is equal to total assets. Next, you can make income statement of year 2015. Cell C3 includes sales for year 2015. Cell C4 includes cost of goods sold. Cell C5 includes depreciation. Earnings before interest and taxes is sales minus cost of goods sold and depreciation, so it is $4,500, minus $2,400, minus $900. Which is equal to $1,200. Next, interest paid is in cell C6. Then, taxable income is earnings before interest and taxes minus interest paid. It is $1,040. We assume that the tax rate is 25%. Taxes are $1,040 times 25%, is equal to $260. Net income is taxable income minus taxes. It is $780. Dividends are in cell C7, and it is $210, retained earnings is net income minus dividends. It is $570. In this case, we know that, $570 of net income is not paid to shareholders, but retained as firm’s additional capital. So far we have learned how to make balance sheet and income statement, given basic information about a firm’s transactions.